Nilesh K.Shah, CHENNAI V. ACIT Non Corporate Ward 9(1), CHENNAI

ITA 1332/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6202 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 20-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Unexplained cash credit; Set aside
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !', $ '% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.1332/CHNY/2018 ' (' / ASSESSMENT YEAR : 2013-14 SHRI NILESH K. SHAH, NO.253, NEW NO.471, SYDENHAMS ROAD, CHOOLAI, CHENNAI - 600 112. PAN : AASPS 3545 G V. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE WARD 9(1), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI K. BALASUBRAMANIAN, ADVOCATE ,-*+ . / / RESPONDENT BY : SHRI S. PANDIAN, JCIT 0 . 1$ / DATE OF HEARING : 24.07.2019 23( . 1$ / DATE OF PRONOUNCEMENT : 11.10.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -10, CHENNAI, DATED 31.01.2018 AND PERTAINS TO ASSESSMENT YEAR 2013-14. 2. SHRI K. BALASUBRAMANIAN, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE PURCHASED SHARES OF M/S NCL RESEARCH AND 2 I.T.A. NO.1332/CHNY/18 FINANCIAL SERVICES LTD. FROM STOCK EXCHANGE. ACCOR DING TO THE LD. COUNSEL, THE SHARES WERE KEPT IN THE DEMAT ACCOUNT FOR MORE THAN 15 MONTHS. SUBSEQUENTLY, THE ASSESSEE SOLD THE SHARES THROUGH STOCK EXCHANGE. ACCORDING TO THE LD. COUNSEL, THE ASSESS EE FILED THE COPY OF THE CONTRACT NOTE, STATEMENT OF DEMAT ACCOUNT, ETC. BEFORE THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER FOUND THAT M/S NCL RESEARCH AND FINANCIAL SERVICES LTD. IS A PENNY STOCK COMPAN Y ON THE BASIS OF THE INFORMATION SAID TO BE OBTAINED FROM ONLINE SEARCH. REFERRING TO PARA 2.4 OF THE ASSESSMENT ORDER, THE LD.COUNSEL SUBMITTED T HAT BASED UPON THE INFORMATION SAID TO BE FOUND ON ONLINE SEARCH, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 10( 38) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') AND MADE ADDITION UN DER SECTION 68 OF THE ACT AS UNEXPLAINED CREDIT. ACCORDING TO THE LD. CO UNSEL, THE MATERIAL FOUND DURING THE COURSE OF ONLINE SEARCH BY THE ASS ESSING OFFICER WAS NOT FURNISHED TO THE ASSESSEE. THEREFORE, THE ASSE SSEE HAD NO OCCASION TO EXPLAIN THE SAME. 3. REFERRING TO THE ORDER OF THE CIT(APPEALS), THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT M/S NCL RESEARCH AND FINANC IAL SERVICES LTD. CAME TO THE ADVERSE NOTICE OF SEBI IN A PENNY STOCK SCAN AND ONLINE TRADING WAS SUSPENDED. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) FOUND THAT THERE WAS ARTIFICIAL INCREA SE IN THE PRICE OF 3 I.T.A. NO.1332/CHNY/18 SHARES. HOWEVER, THE FACT THAT THE ASSESSEE PURCHA SED THROUGH ONLINE IS NOT DISPUTED. THE ASSESSEE SOLD THE SHARES THROUGH ONLINE IS ALSO NOT DISPUTED. ACCORDING TO THE LD. COUNSEL, IT IS NOT KNOWN WHEN THE SEBI SUSPENDED TRADING OF SHARES OF M/S NCL RESEARCH AND FINANCIAL SERVICES LTD. THE FACT REMAINS THAT M/S NCL RESEAR CH AND FINANCIAL SERVICES LTD. IS ONE OF THE LISTED COMPANIES FOR TR ADING IN THE SEBI PLATFORM. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE OBSERVATION OF THE CIT(APPEALS) THAT THE PRICE OF SHARES WAS ARTIFICIA LLY INCREASED HAS NO BASIS. 4. ON THE CONTRARY, DR. S. PANDIAN, THE LD. DEPARTM ENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE PURCHAS ED THE SHARES OF M/S NCL RESEARCH AND FINANCIAL SERVICES LTD. AT PRI CE LISTED IN BOMBAY STOCK EXCHANGE THROUGH BROKERS. ACCORDING TO THE L D. D.R., THE ASSESSEE ALSO DISPOSED THE SHARES OF M/S NCL RESEAR CH AND FINANCIAL SERVICES LTD. AT AN AVERAGE RATE OF 1,084/- PER SHARE IN THE MONTHS OF NOVEMBER, 2012 AND FEBRUARY, 2013. THE PURCHASE PR ICE OF SHARES WAS ADMITTEDLY 2/- PER SHARE. THE SALE PRICE WAS APPARENTLY 54,10 0 TIMES MORE THAN THE PURCHASE PRICE / FACE VALUE OF THE SH ARE. ACCORDING TO THE LD. D.R., THIS KIND OF INCREASE IS HIGHLY IMPROBABL E IN THE NORMAL COURSE, THEREFORE, IT IS OBVIOUS THAT THE PRICE OF THE SHAR ES WAS ARTIFICIALLY 4 I.T.A. NO.1332/CHNY/18 INCREASED. HENCE, THE CIT(APPEALS) HAS RIGHTLY CON FIRMED THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER APPEARS TO HAVE MADE A SEARCH THROUGH ONLINE IN RES PECT OF 20 COMPANIES SAID TO BE REGISTERED IN THE SAME ADDRESS AND IN THE SAME ROOM. THE ASSESSEE ADMITTEDLY PURCHASED THE SHARES OF M/S NCL RESEARCH AND FINANCIAL SERVICES LTD. THE FACE VALU E OF SUCH SHARE WAS 2/- PER SHARE. THE ASSESSEE SOLD THE SHARES AT 1,084/- PER SHARE WITHIN A SHORT SPAN OF 15 MONTHS. THE QUESTION ARI SES FOR CONSIDERATION IS WHEN THE ASSESSEE PURCHASED THE SHARES FROM STOC K EXCHANGE THROUGH BROKER AND ALSO SOLD THE SAME, WHETHER THE ASSESSEE CAN BE SAID TO HAVE MANIPULATED THE PRICE OF THE SHARES? IT IS NOT KNOWN HOW THE ASSESSEE IS RELATED TO THE PROMOTERS OF THE COM PANY OR HOW THE ASSESSEE INVOLVED IN THE MANIPULATION / INFLATION O F THE PRICE OF SHARES AT THE TIME OF SALE. WHETHER THERE WAS ANY CARTEL FOR MED TO INFLATE THE PRICE OF SHARES IS ALSO NOT BROUGHT ON RECORD. 6. WHEN THE ASSESSEE IS A CITIZEN OF THIS COUNTRY, INVESTED IN THE SHARES OF THE COMPANY WITH AN INTENTION TO EARN PRO FIT ON SALE, CAN WE SAY SUCH AN ACTIVITY IS ILLEGAL AND PROHIBITED BY L AW? THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT MERE INVESTMENT IN THE SHARES AND EARNING 5 I.T.A. NO.1332/CHNY/18 PROFIT ON SALE CANNOT BE CONSTRUED TO BE AN ILLEGAL ACTIVITY OR PROHIBITED BY LAW. IN FACT, THE LAW PERMITS THE CITIZENS OF THIS COUNTRY TO INVEST IN THE SHARES. THE ASSESSING OFFICER CLAIMS THAT THE PRIC E OF THE SHARES OF M/S NCL RESEARCH AND FINANCIAL SERVICES LTD. IS INFLATE D ARTIFICIALLY SO AS TO EARN PROFIT WHICH IS NOT POSSIBLE IN THE NORMAL TRA DING ACTIVITY. THIS FACT HAS TO BE EXAMINED AND BROUGHT ON RECORD HOW THE AS SESSEE IS INVOLVED IN THE PROMOTION OF THE COMPANY OR INVOLVED IN INFL ATING THE SHARES OF THE COMPANY. IF THE ASSESSEE IS A PART OF CARTEL IN PR OMOTING THE COMPANY AND INFLATING THE PRICE OF THE SHARES ARTIFICIALLY, THEN, NATURALLY SUCH PROFIT CANNOT BE ALLOWED AS EXEMPTED UNDER SECTION 10(38) OF THE ACT. 7. HOWEVER, IT IS FOR THE ASSESSING OFFICER TO BRIN G ON RECORD WHETHER ANY SUCH CARTEL WAS FORMED AND WHETHER THE ASSESSEE WAS A PARTY IN INFLATING THE PRICE OF THE SHARES ARTIFICIALLY. MO REOVER, THE SEARCH SAID TO BE MADE BY THE ASSESSING OFFICER THROUGH ONLINE WAS NOT FURNISHED TO THE ASSESSEE. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED. A CCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE RAISED BY THE ASSESSEE IS REMITTED BACK TO THE FILE OF THE AS SESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER IN TH E LIGHT OF THE MATERIAL THAT MAY BE FILED BY THE ASSESSEE AFTER FURNISHING COPIES OF THE MATERIAL SAID TO BE GATHERED BY THE ASSESSING OFFICER BY SEA RCH THROUGH ONLINE 6 I.T.A. NO.1332/CHNY/18 AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANC E WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 11 TH OCTOBER, 2019 AT CHENNAI. SD/- SD/- (. !') ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 11 TH OCTOBER, 2019. KRI. . ,167 87(1 /COPY TO: 1. *+/ APPELLANT 2. ,-*+/ RESPONDENT 3. 0 91 () /CIT(A)-10, CHENNAI-34 4. PRINCIPAL CIT-7, CHENNAI 5. 7: ,1 /DR 6. ' ; /GF.